If there are three themes running through Charles Schwab's life, they are: hard work, persistence and vision--in that order. Pursuing these ideals helped him to make San Francisco-based Charles Schwab & Co. Inc., the world's largest and most innovative discount brokerage house. Fortune magazine dubbed Schwab, 59, "the king of discounting." With 235 branch offices worldwide employing nearly 10,000 employees, the company chalked up 1995 revenues of $1.42 billion, a 33 percent gain over 1994. That's not bad for someone who, as a child, could barely read a simple sentence.

The keys to Schwab's extraordinary success can be traced to his childhood in California's San Joaquin Valley. From the moment he entered school, Schwab had great difficulty learning. He didn't understand the reason for his academic struggles until the mid-1970s, when his son Michael, then 10 years old, was diagnosed as having dyslexia, a learning disability that makes reading painfully difficult. Only at that time did Schwab discover that he, too, was dyslexic.

Rather than seeing things sequentially, the way most of us do, Schwab's world was more like a huge, three-dimensional crossword puzzle. He could easily absorb visual symbols, such as illustrations, drawings or cartoons, but deciphering straight text threw him. "If it weren't for the Classics Illustrated comics series, I don't know how I would have gotten through school," he chuckles.

Schwab laughs about the problem now, but for him, learning has been a lifelong struggle. "I remember spending a lot of time at the blackboard running through the multiplication tables," he says. "The teachers were hard on me. They drilled me until I got it."

His teachers assumed he was slow. So did Schwab. "I didn't know I had a learning impediment," he says. "All I knew was that I had to work harder than everyone else."

Schwab's disability turned out to be a blessing in disguise, because it allowed him to see the world differently. "There were people who were a lot brighter than I was, or at least seemed to be, because they got much higher marks," he explains. "But I could see the bigger picture, whereas they could only see what was right in front of them."

A Meager Beginning

Combine the need to work harder with the Puritan work ethic
instilled in him by his father, a Sacramento, California, district
attorney, and you have the makings of a relentless, hard-driving
entrepreneur. Schwab's father, having grown up during the
Depression, constantly drove home the importance of prudent
spending and of socking away money for a rainy day. "The
Depression had a major impact on my parents and people my
age," he says. "Those discussions about the difficulty of
the Depression were burned in my mind. I was cautioned about not
wasting money and the importance of stretching a dollar as far as
it could go. There was a real incentive to work hard and earn money
so I wouldn't wind up without any financial
resources."

Pressure to contribute to the family funds fired up Schwab's
entrepreneurial instincts. When he was 11, he made money selling
the eggs of his father's chickens, as well as the droppings for
use as fertilizer. When it was time for the hens to
"retire," he negotiated a good price for them as fryers.
As a teenager, he sold ice cream in the summer and sacked walnuts
in the fall.

"I learned a lot when I was kid," says Schwab. "I
didn't know what my potential was, but instinctively I knew
there were lots of ways to make money. No matter how I earned it,
my goal was always to make and save money. The next step in my life
was learning how to invest it."

By his late teens, Schwab already knew he wanted to make his
mark in the investment world. He insists his learning disability
had something to do with his fascination with numbers. However,
plunking down $100 of his hard-earned savings to buy 100 shares of
a low-priced, speculative stock and then seeing a hefty return on
his money might have played a part in his decision, too.

Entering Stanford University, Schwab set his sights on becoming
a securities analyst. He managed to earn a bachelor's degree in
economics and a master's degree in business administration,
though not without difficulty. "My reading speed was about
half that of the average Stanford student," he says. Once
again, he found a second resource: Thanks to Cliff's Notes,
Schwab passed with flying colors.

After graduation, in 1961, Schwab and two friends from Stanford
cranked out a monthly newsletter called "Investment
Indicators," selling one-year subscriptions for $84. Two years
later, the under-funded newsletter almost went belly-up. "The
newsletter needed a marketing push," says Schwab, "so I
developed a direct-mail marketing program that boosted
circulation."

Disaster Strikes

As the newsletter took off late in 1963, Schwab launched the
Investment Indicators mutual fund in San Francisco. By 1967 the
fund had grown to $20 million, but then, in 1969, Schwab hit a snag
while expanding his operations to other states. Texas ordered
Schwab to stop selling shares to its citizens because he wasn't
registered to do business there. Schwab fought the decision, but
lost. To make matters worse, things soured when the market tumbled,
and Schwab was forced into financial ruin when he had to reimburse
each Texas investor. By the time it was all over, Schwab was more
than $100,000 in debt and forced to start over.

The early 1970s brought more financial disasters for Schwab: a
drive-thru animal park that never opened, and Music Expo, a
three-day extravaganza that took place at San Francisco's Cow
Palace. Both ventures failed miserably.

But Schwab became more determined than ever, chalking these
defeats up as priceless learning experiences. "I learned that
for every big success a person has, there must be at least one huge
failure," he says. "I think that's the basic law of
the universe."

In 1971, Schwab, now ready to make his mark as an innovator,
borrowed $100,000 from his uncle and launched First Commander Corp.
as a traditional brokerage house. By 1973, there were rumblings
that a major change would rock the investment world: the then
181-year-old fixed-commission structure would be abolished by the
Securities and Exchange Commission in favor of variable
commissions. "It meant brokerage houses could lower the rates
they charged for transactions," says Schwab. "It signaled
the dawn of a new age, and I intended to be part of it."

That day came on May 1, 1975, which marked the legal elimination
of the fixed-rate structure. As soon as it was announced that
brokerage houses had free reign on their commissions, many small
companies made plans to operate as discount houses. Anticipating
the change, Schwab was ready to do business as a discount broker.
"In 1974, we had already changed our name to Charles Schwab
& Co.," he says, "to create a new identity as a
discount broker."

Rolling with the Punches

Schwab saw the change in rate structure as a chance to execute
the savings and investment philosophies that had been instilled in
him as a child. "It was an opportunity to develop new and
creative investment and savings vehicles," he says.

Schwab never intended to be just another discount broker
offering bargain-counter trading for small investors who didn't
want to deal with the big guys. From the outset, he established
himself as an innovator--and an ethical one at that. "As soon
as I established an identity as a discount broker, I wanted to
create a reputation as an honest broker who sincerely cared about
his customers," says Schwab.

Schwab discovered he had his work cut out for him. His first
priority was toppling the image that discount brokers were slick
operators offering third-rate, inferior brokerage services; rumors
had circulated that discounters could not offer clients the best
executions or market analysis and that they lacked sufficient
capital to weather sudden market downturns.

Schwab separated his company from the huge Wall Street brokerage
firms that depend on commissioned salespeople by paying his brokers
salaries and awarding bonuses based on customer satisfaction.
"That fundamental change altered the traditional paradigm of
the brokerage industry," says Schwab. "It changed the
entire relationship between customer and broker. Even today, if you
get to the core of why we are different than traditional commission
firms, it is that one single factor that makes us stand out. By
paying our brokers salaries, we removed the concept of interest
from the relationship."

Through innovative marketing, he began to offer a selection of
low-cost and imaginative investment programs, such as no-fee mutual
funds, computerized stock trading and specialized banking services.
Without resorting to the high-pressure tactics common among many of
the larger, traditional brokerage firms, he left it up to the
customers to stop in at one of the branches and talk to a Schwab
broker.

It was simply smart marketing that promtped Schwab to make
himself the spokesperson for his company. In commercials, potential
customers didn't see some slick actor pretending to be a Schwab
broker; instead, they saw clean-cut, All-American Chuck Schwab
himself, dressed conservatively and presenting a hard-to-resist,
down-to-earth manner that clearly identified him as a no-nonsense,
straight-talking professional ready to meet his customers'
investment needs.

The plan worked. Schwab finished his first year racking up sales
of $30,000 a month. In 1976, that figure doubled to $60,000 a month
and continued to grow. "Revenues increased by about 40 percent
a year," he says, "and moved very fast."

Technological Advantages

Schwab also knew the industry was changing rapidly, and that
today's innovators would be tomorrow's leaders. He intended
to be one of them. "I didn't want to fall into a rut and
stay in one place," he says. "The key was to continually
offer better service. And one of the most efficient ways to do that
is through technological innovation."

In 1979, he shocked his competitors by spending $2 million to
buy a used IBM System/360 mainframe computer and software. "At
the time, it was a lot of money to invest in technology, but I knew
it would pay off," says Schwab. He was right. Two years later,
financial reporters heralded Schwab as an innovator, one who
offered better technology than the average Wall Street firm.

Even though the business was growing rapidly, Schwab needed
large amounts of capital to fuel plans for expansion. "I was
at a point where I needed talented people," he says. "But
I couldn't afford them. Without a lot of reserve capital, it
was hard recruiting people away from big companies. They had no
reason to leave a secure job and take a gamble on a fledgling
company."

In an attempt to raise money quickly, Schwab sold his company in
1983 to BankAmerica Corp. for $55 million in the bank's stock.
In 1987, Schwab began to regret the move, as the giant bank was
sinking in loan losses. "After coming that far, I was not
about to lose everything I had worked for," says a determined
Schwab. He bought his company back for $175 million in cash and
$105 million in bonds. Six months later, (just one month before the
October, 1987 stock market debacle), he took his company public,
with a price tag of $100 million more than he had paid BankAmerica
for his company.

Once again firmly positioned in the fast lane, Schwab intended
to stay there by continually upgrading his technology. In 1989, he
introduced TeleBroker, an automated 800-number touch-tone telephone
system that handled more than 14 million client calls and more than
640,000 trades in its first year. He also spent an additional $20
million to upgrade software. Today, 25 percent of Schwab's
trades are made through the TeleBroker service.

Judging by his sales, credibility and market penetration,
you'd think Schwab would feel untouchable. Yet, he still
worries about his competitors. "We have competitors at every
level of the business," he says. "That's the way the
American system works. Maybe it's a good thing, because it
keeps us fresh and on our toes."

Schwab adds that a crowded marketplace keeps him humble.
"Early on, I learned the importance of keeping in touch with
the core of my business. Once you lose sight of that, you're
not doing your job. No matter how big my business gets, I still ask
myself how I can do better."